Mumbai: India’s largest consumer staples company Hindustan Unilever Ltd (HUL), owner of brands such as Close Up toothpaste, Lifebuoy soap and Taj Mahal tea, saw its net profit rise by 29.6% to Rs493.08 crore in the second quarter ended 30 June.
Sales rose 12.9% to Rs3,481.40 crore, thanks to price increases and double digit growth across most categories. Soaps and detergents sales, which account for over a quarter of the company’s sales, grew by 14.6% to Rs1,668.7 crore.
“The laundry margins are still under pressure but it has improved over the same quarter a year ago”, said Harish Manwani, chairman, HUL.
The company said that personal products growth was lower at 6.02%, up to Rs897.77 crore, mainly due to clearance sales of its key brand Fair & Lovely, ahead of a relaunch.
“The personal care segment’s non-performance is very critical since it draws the highest margin at 29%. We expected it to bounce back in this quarter, but the growth was disappointing”, said Anand Shah, an analyst with Angel Broking, a Mumbai based brokerage firm.
The beverages business posted a 21% rise in sales, while processed food business grew at 38%. HUL, one of India’s largest advertisers in India, lowered its ad spending to Rs336.04 crore, down 2.7% over the year-ago quarter.
Analysts note that although margins have expanded 130 basis points in the quarter, much of that has to do with reduction in advertising spending and detergent price hikes.
As anticipated, HUL also set a buyback of shares at a maximum price at Rs230 each share, a 17% premium over Friday’s closing price, and will spend up to Rs630 crore on the plan.
The company said that the move would effectively utilize its surplus cash. If the buyback is successful, the holding of parent Unilever Plc will likely increase from 51.42% to 52.1%.